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A rising economic tide, but many left drowning in debt

31 March, 2015

Growing demand for debt advice – the number of people contacting StepChange Debt Charity has risen 56% since 2012 – it was contacted by 577,677 people in 2014

Single parents and under-25s worst affected - debt problems are rising fastest among these two groups; single parents are significantly over-represented among the charity’s clients when compared to national figures

Underemployment and insecure housing – an increasing proportion of the charity’s clients are in part time work and private rented accommodation

More people behind on essential bills – 39.8% of the charity’s clients are behind on at least one essential household bill (e.g. rent, energy bills, council tax), up from 34.9% in 2012

New figures from StepChange Debt Charity show that despite positive economic news rapidly increasing numbers of people are seeking help for debt problems and that the growth in demand is sharpest among single parents and the under-25s.

The charity’s research also highlights how despite an improving economic climate, the struggle to keep up with essential household bills continues to worsen and that those struggling with debt are increasingly likely to be in part-time work and live in private rented accommodation.

The findings are contained in the charity’s Statistics Yearbook (released today March 31) which details the latest trends in personal debt, based on analysis of the charity’s data warehouse which contains information on 2.8m clients past and present.

The figures are a stark reminder that many households are far from out of the woods and that for many people the situation is getting worse. The charity is calling on the next government to do far more to help prevent people falling into debt and guarantee better protections to those who find themselves in serious financial difficulty.

Demand

The charity has experienced significant increases in demand for its services in recent years. The charity was contacted by 577,677 people in 2014, up from 369,878 in 2012, an increase of 56%.

Single parents

An analysis of the charity’s clients by family composition shows that the growth in demand is highest among single parents. The number of single parents contacting the charity has risen from 30,383 in 2012 to 62,259, an increase of 105%.

Single parents now represent 18.3% of people contacting the charity; a comparison with national statistics shows that single parents are significantly overrepresented, just 10.6% of the adult population are single parents. Single parents are more likely than any other family type to have debts on high-cost forms of credit such as catalogues and home credit.

Under-25s

An analysis of the charity’s clients by age group shows that the growth in demand is fastest among the under-25s. The number of people under-25 contacting the charity has increased from 22,262 in 2012 to 44,241 in 2014, an increase of 99%. The charity’s report shows that unemployment is a far more likely cause of debt problems than for any other group and that the under-25s are more likely to have debts on high-cost credit such as payday loans and catalogues.

Underemployment and insecure housing

The charity is concerned by increasing proportions of clients who are in part-time work and who live in private rented accommodation. Last year 33.3% of the charity’s clients were in private rented accommodation, up from 29.3% in 2012. In 2014, 18.1% of the charity’s clients were in part-time work, up from 16.7% in 2012. The charity believes these figures indicate the fragility of the finances of people in these groups and the increasing likelihood that they will fall into financial difficulty.

The struggle to make ends meet

In recent years the charity has seen a shift in the nature of debt problems among its client base. The last three years has seen substantial increases in the proportion of clients who are behind on at least one essential household bill (e.g. rent, energy bills, council tax), from 34.9% in 2012 to 39.8% last year.

Earlier this month, the Office of Budget Responsibility predicted that household debt to income ratios will return to pre-crisis levels in the coming years. The charity is concerned that increasing amounts of people will use credit to plug gaps in household budgets and that increased borrowing will leave many more vulnerable to falling into problem debt.

Mike O’Connor, Chief Executive of StepChange Debt Charity, said:

“We are helping more people than ever who are struggling with debt. As household finances have become more fragile it is now easier for people to fall into debt. With debt levels set to rise again in the coming years, there is a substantial risk that many more households will fall into this trap.

“The next government must commit to ensuring that growing debt levels do not translate into a new personal debt crisis. We need urgent action to prevent people from falling into debt and delivering better protections to help people and their families get back on their feet.”

Gingerbread Chief Executive Fiona Weir said:

“We are very concerned to see such a steep rise in single parents needing to seek help with debt.

“Our own research has found that work isn’t giving single parent families the security or income they need and that the majority are under constant financial strain. Single parents tell us they have cut back all they can and just one unexpected cost can push them into crisis.”

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